Short answer
A passbook or savings account that pays interest is an interest-bearing loan to the bank: the International Islamic Fiqh Academy and most institutions rule it out. The alternatives are the participation accounts of Islamic banks (mudarabah, wakalah) and investing in compliant funds; any interest already received is purified.
What the institutions say
Official positions, with their reference. The badge sums up the institution’s position, not an opinion of Assabile.
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International Islamic Fiqh Academy Organisation of Islamic Cooperation, JeddahProhibited
Interest-bearing savings accounts are usurious loans; the investment accounts of an Islamic bank are a mudarabah with no guarantee of capital.
Resolution 86 (3/9), 1995
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Diyanet Presidency of Religious Affairs, Türkiye (High Council of Religious Affairs)Under conditions
Interest-bearing fixed-term accounts are forbidden; the participation accounts of participation banks are permitted; life insurance and retirement savings are permitted if the funds are invested in lawful assets.
Fatwas of 15/09/2020 and 19/12/2018; decision 2005/64
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Dar al-Ifta of Egypt House of Fatwa, CairoPermitted
Fixed-return bank savings certificates and savings accounts are permitted. A minority view.
Fatwas in line with al-Azhar decision 321 (2002)
Positions are reported as they stand; other scholars may hold other views. Method and disclaimers
Depending on your country
- France
- The Livret A, LDDS, LEP, PEL and the euro funds (fonds en euros) of assurance-vie (life-insurance savings contracts) pay interest or a guaranteed return derived mainly from bonds: they are excluded according to the majority view. Unit-linked funds invested in compliant funds or ETFs, within an assurance-vie or a PEA (share savings plan), are the most common route: see the guide to France.
- United Kingdom
- Islamic banks offer savings accounts and ISAs paying an expected profit; Premium Bonds are prohibited by the Academy (resolution 60): see the question devoted to them.
- Türkiye
- The participation account (katılım hesabı) replaces the fixed-term deposit; Diyanet considers it permissible. See the guide to Türkiye.
- Morocco
- Participative banks offer investment accounts; the “compte sur carnet” (passbook account) of conventional banks pays interest.
- Egypt
- Bank investment certificates are considered permissible by Dar al-Ifta; Islamic banks offer participation-based equivalents.
Why a savings account is a problem
The Livret A (the French regulated savings account), a savings account or a fixed-term deposit all work in the same way: you lend your money to the bank, which guarantees the capital and pays you a rate. That is the definition of an interest-bearing loan, which the International Islamic Fiqh Academy classes among usurious loans (resolution 86 (3/9)). The fact that the rate is regulated, low or below inflation does not change the nature of the contract.
The alternatives
- A participation account with an Islamic or participation bank: your savings are invested through mudarabah or wakalah; the return depends on results and the capital is not guaranteed by the bank.
- Compliant funds or ETFs within a tax wrapper (unit-linked life insurance, PEA, ISA, retirement savings plan): see the fund directory.
- Physical gold, held as your own property: see gold.
- Keeping an emergency fund that pays no interest in a current account, and purifying the occasional interest received.
What if I already have a savings account?
The capital belongs to you; the interest is purified: see what to do with interest. Whether or not to close the account is a practical choice; if you keep it (for example for an emergency fund), give away the interest paid each year, with the help of the purification tool.
The verses
يَٰٓأَيُّهَا ٱلَّذِينَ ءَامَنُوا۟ ٱتَّقُوا۟ ٱللَّهَ وَذَرُوا۟ مَا بَقِىَ مِنَ ٱلرِّبَوٰٓا۟ إِن كُنتُم مُّؤْمِنِينَ ٢٧٨ فَإِن لَّمْ تَفْعَلُوا۟ فَأْذَنُوا۟ بِحَرْبٍ مِّنَ ٱللَّهِ وَرَسُولِهِۦ وَإِن تُبْتُمْ فَلَكُمْ رُءُوسُ أَمْوَٰلِكُمْ لَا تَظْلِمُونَ وَلَا تُظْلَمُونَ ٢٧٩
278 O you who have believed, fear Allāh and give up what remains [due to you] of interest, if you should be believers.
279 And if you do not, then be informed of a war [against you] from Allāh and His Messenger. But if you repent, you may have your principal - [thus] you do no wrong, nor are you wronged.
Frequently asked questions
Is the LEP, which is reserved for people on modest incomes, an exception?
Not according to the majority view: it is an interest-bearing loan like the other regulated savings accounts. The interest received is given away.
Is life insurance (assurance-vie) halal?
The euro fund, which is guaranteed and invested mainly in bonds, is excluded by the majority view. Unit-linked funds invested in compliant funds are an alternative; Diyanet accepts with-profits life insurance if the premiums are invested in lawful assets (2005).